2017 (2) TMI 505 - AT - Income Tax

Penalty under section 271B - not getting accounts audited under section 44AB - Held that - The penalty under section 271B is imposable under the Act if the assessee fails to prove that there was a reasonable cause for failure on the part of the assessee for not complying the mandatory provision of section 44AB in terms of 273B of the Act. In our view, the assessee was required to get its accounts audited at the time of filing of the return of income at the first instance i.e., on 30.07.2007 and in any case the assessee was having an opportunity to file the audited reports after receipt of the notice under section 153A of the Act when the assessee was called upon to file the return of income. However, despite receipt of notice issued under section 153A, the assessee had failed to file the audited accounts report. The claim of the assessee that the assessee was following the project completion method, therefore the assessee had bonafide belief for not getting its accounts audited, is not sustainable as the application of section 44AB is independent and is not depended upon the method of accounts adopted by the assessee under section 145 of the Act whether it is project completion method or percentage completion method. The requirement under section 44AB is based on the total sales, turnover or gross receipt as the case may be of the assessee and . If it exceeds the threshold limit as provided under the Act, then the assessee is required to compulsorily get its accounts audited before the specific date. Since, the assessee has failed to do so, therefore, we have no other option but to confirm the order passed by the CIT in imposing the penalty. - Decided against assessee.

Summary

Issues:
Appeal against the imposition of penalty under section 271B for violation of Section 44AB of the Income Tax Act.

Detailed Analysis:
1. Background and Facts:
- The appeals arose from a common order confirming the penalty for not complying with Section 44AB.
- A search under section 132 revealed discrepancies in gross receipts for different projects.
- The assessee failed to get the accounts audited as required under section 44AB.

2. Assessee's Arguments:
- Assessee claimed to follow project completion method and believed accounts need not be audited until project completion.
- Cited judgments supporting their stance, including Koramangala Club Vs. ITO and others.

3. Revenue's Arguments:
- Revenue contended the assessee did not comply with section 44AB, justifying the penalty under section 271B.
- Referenced judgments like DCIT Vs. Gopal Krishan Builders and CIT Vs. S. C Naregal to support their position.

4. Tribunal's Decision:
- Tribunal noted the search under section 132 and subsequent actions.
- Emphasized the requirement under section 44AB to audit accounts based on total sales or receipts, irrespective of accounting methods.
- Rejected assessee's claim of following project completion method as a reason for non-audit.
- Upheld imposition of penalty under section 271B based on non-compliance with section 44AB.
- Quoted Lucknow Tribunal's judgment and jurisdictional High Court's decision to support the decision.
- Dismissed appeals (ITA Nos. 271, 272/Bang/2014) based on the same reasoning as in ITA No. 270/2014.

5. Conclusion:
- The appeals were dismissed, affirming the penalty for failure to audit accounts as required by Section 44AB.
- Tribunal's decision aligned with the legal provisions and previous judgments, emphasizing the mandatory nature of audit requirements under the Income Tax Act.

This comprehensive analysis covers the background, arguments presented by both parties, the tribunal's decision, and the final outcome of the appeals challenging the penalty imposed for non-compliance with Section 44AB of the Income Tax Act.